Investor's wiki

Bond Broker

Bond Broker

What Is a Bond Broker?

A bond broker is a broker who executes over-the-counter (OTC) and listed bond trades for the benefit of investors or traders. Bond brokers act as middle people among buyers and sellers of debt securities, keeping the personalities of the two players toward the finish of the transaction anonymous, and earning a commission for their services. Brokers frequently speak with traders online or over the telephone to get quotes from counterparies to a trade.

Understanding Bond Brokers

Buying Treasury securities doesn't need the services of a bond broker as this should effectively be possible through the online Treasury platform called Treasury Direct. Nonetheless, to purchase municipal bonds and corporate bonds, investors must do as such through a broker. A bond broker, then, is an intermediary among buyers and issuers or sellers of bonds.

The broker trades bonds on the trading floor of an exchange or in the over-the-counter (OTC) markets and buys and sells bond securities for investors in exchange for commissions. Bond brokers bring in money off the spread at which they exchange bonds among traders, and face little challenge in the process since brokers normally don't hold long or short situations in bonds. For example, if a broker purchases a bond for $98 and sells it for $99, he procures a spread of $1 on the transaction.

Bond Market Considerations

There is a lack of price transparency for bonds, compared to the prices for equity securities. Bond brokers might exploit this fact by increasing the bond's price. A markup is the point at which a broker buys a bond at a low price, then shortly thereafter resells it to an unaware customer at a higher price. The broker brings in his money from the spread of the buy and sell transaction.

While bond brokers are qualified for a 1%-2% markup for their trading services and carefulness, the spread may be too unreasonable (if greater than 5%), making a conflict of interest between a bond broker who needs to sell bonds at a high price and a client who needs to buy them at a low price. Since commission costs and the size of the markup are hidden, an investor must guarantee that s/he is educated and proficient about the bond and the price range in which the bonds ought to trade.

However bond brokers play a key job in keeping up with the secrecy of buyers and sellers in the bond market, as computer systems advance, a portion of these duties have become obsolete. With respect to now, human interaction actually plays an important job in quite a bit of bond trading.

Bond Broker Certifications

One major requirement before somebody can turn into a bond broker is to finish the General Securities Representative Exam, usually called the Series 7 exam, which is offered by the Financial Industry Regulatory Authority (FINRA) and allows brokers to participate in the purchase and sale of securities.

Before the exam can be taken, the candidate being referred to must be sponsored by a broker/seller firm. This requirement makes it fundamental for any individual who wants to be a broker to initially look for a temporary position or employment with a brokerage firm. After Oct. 1, 2018, Series 7 candidates will likewise need to take the Securities Industry Essentials exam before sitting for the Series 7.

Also, most states expect brokers to take the Uniform Securities Agent State Law Examination, generally known as Series 63. As the name proposes, the exam manages the laws and regulations of the state that govern financial securities.


  • Bond markets are in many cases more complex and opaque than stock markets, making the job of a broker for data and price discovery more pivotal.
  • Bond brokers frequently participate in over-the-counter transactions, which might incorporate bigger commissions or imprint ups than additional liquid listed products.
  • A bond broker is a financial intermediary that matches buy and sell orders in the fixed income market, for their clients.